19 Aug 2020 Tiger Brands divests its processed meat businesses
Tiger Brands is quitting the processed meat sector, agreeing to dispose of its value-added meat products businesses and inventories for R428m to two parties.
Tiger Brands has agreed to sell its its processed meat facilities at Germiston, Polokwane and Pretoria for R153m to Silver Blade, a wholly owned subsidiary of unlisted poultry group, Country Bird, one of the largest poultry and animal feeds producers in Africa. Silver Blade will pay an additional R158m for the product inventories.
Tiger will sell its abattoir business at Olifantsfontein to pork producer, Molare for R100m, Molare is one of South Africa’s major piggery businesses
According to Tiger Brands, the agreements form part of a strategic review conducted by the board of directors in 2017. The food group said on Monday that the role of its value-added meat products business units within the company’s portfolio had been earmarked for evaluation “given this business’s unique value chain and the perishable nature of its underlying products”.
The world’s deadliest listeriosis outbreak linked to a Tiger Brands Enterprise meat-processing factory in 2018 left 216 people dead.
The company was ordered to recall its processed meats and shut its factories after the NICD and the WHO confirmed the Polokwane factory was contaminated with the specific strain of listeria bacteria linked to the outbreak. Tiger Brands had not told consumers of a recall of listeria-infected chicken polony from its factory weeks earlier.
Analyst Anthony Clark said Country Bird had scored a good deal as Tiger Brands really wanted to get rid of its processed meat business. “To me it seems like they paid a very, very low price for a business which in theory could add material upside benefits to Country Bird Holdings.”
In 2017, before the listeria outbreak and factory closure, value-added meats made up 20% of its consumer food business, which saw revenues of R11.1bn. This suggested it sold more than R2bn worth of viennas and polony in a single year. Its share price plunged 40% in 2018.
Country Bird chipper
The CEO of Country Bird Holdings, Marthinus Stander, said: “It’s a good acquisition at a good price for our expansion drive.”
Stander said the Tiger Brands factories that make processed meat and premium ready-to-eat products “integrated” well with Country Bird’s chicken products.
Asked about the risk of another listeria outbreak at the Enterprise factory, Stander said “managing the risk of food-borne disease is not new to us”.
“We are used to the risk associated with meat. Whether it is polony or chicken, you have to have the right protocols in place. You have to manage the risk of bacteria.”
Stander also said affordable protein such as polony and vienna sausages was “highly relevant to consumers due to the economic consequences of Covid-19”.
The Enterprise factories also make high-end ready-to-eat meat and home meal replacement products, which are popular at the moment, he said, and there was space in the Germiston factory to add more product lines.
Country Bird Holdings recently bought a 32.1% stake in Quantum Foods, a poultry, animal feeds and egg business, for R308m.
Tiger Brands is facing a class-action lawsuit due to the listeria outbreak linked to its Polokwane factory, but it has denied liability. It said the new owners are indemnified from the legal process.
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